In the last presidential debate between Hillary Clinton and Donald Trump, Clinton said that “half of all” illegal immigrants in the U.S. “actually pay federal income tax.” PolitiFact, a Pulitzer Prize-winning fact check organization, investigated Clinton’s claim and reported: “While there is no official figure, experts estimate that about half of all undocumented workers pay federal income taxes, if not more.”
In reality, the polar opposite is true. Federal government data shows that while roughly half of illegal immigrants file federal tax returns, the vast majority of them don’t pay any federal income taxes. Instead, they use these returns to claim refundable tax credits, which are a form of cash welfare. In other words, illegal immigrants mainly use the federal income tax code to collect money from U.S. citizens.
Reliable Data on Illegal Immigrants Is Scarce
Federal law generally prohibits illegal immigrants from earning income in the U.S., but many of them do so by working for cash and by fraudulently using Social Security numbers. A 2013 report by the Social Security Administration notes that illegal immigrants get Social Security numbers by using counterfeit birth certificates, usurping other people’s numbers, and reusing numbers that they received to work temporarily in the U.S.
Because illegal immigration is often covert, reliable data on it is scarce. In the words of the Congressional Budget Office, figures for the number of illegal immigrants in the U.S. “are subject to considerable uncertainty.” This applies to most data on illegal immigration, but various federal agencies have produced estimates that shed degrees of light on these issues.
Individual Taxpayer Identification Numbers
One of the most reliable sources of data concerning the federal income taxes of illegal immigrants comes from an IRS program that gives them “Individual Taxpayer Identification Numbers” or ITINs. These numbers are “issued regardless of an individual’s immigration status,” and they allow illegal immigrants and foreign investors to file tax returns without a Social Security number.
Obtaining an ITIN also allows illegal immigrants to claim the federal Child Tax Credit, which can provide them with a cash benefit of up to $1,000 per child per year. According to the latest IRS data, 72 percent of all tax returns filed with ITINs in 2010 claimed child tax credits to receive cash payments from the federal government.
It is important to note that illegal immigrants likely received higher child tax credits in 2010 than in other years. This is because the American Recovery and Reinvestment Act (“the Obama stimulus”) enabled more people to claim child tax credits or to claim greater amounts in 2010. Furthermore, the U.S. was still in the early stages of recovering from the Great Recession, and incomes were down. Since child tax credits generally increase as income falls, these payments should have been higher in 2010 than most other years.
Nonetheless, the contrast between tax returns filed with and without ITINs in 2010 is enlightening. As documented above, 72 percent of ITIN filers paid no income tax and received cash payments through child tax credits. In comparison, only 14 percent of people who filed regular tax returns (with a Social Security number instead of an ITIN) paid no income tax and received these payments.
The monetary totals of ITIN returns are also instructive. In 2010, ITIN filers paid a total of $0.9 billion in income taxes and received cash payments of $4.9 billion. In other words, ITIN filers received 5.4 times more cash than they paid in income taxes. Most of this cash—$4.0 billion of it—came through child tax credits. Since these figures include foreign investors who are not eligible for child tax credits, it is possible that little-to-none of the taxes paid came from illegal immigrants.
PolitiFact claimed that illegal immigrants use ITINs to “pay income taxes,” but the truth of the matter is that illegal immigrants mainly use ITINs to get cash from U.S. taxpayers. As explained by the IRS Taxpayer Advocate Service, the federal tax code has provisions “designed to assist low income populations,” and the “IRS no longer is just a revenue collection agency but is also a benefits administrator.”
In 2013 and 2015, a number of Republican congressman cosponsored bills that would restrict illegal immigrants from obtaining refundable child tax credits. However, Congress did not vote on either of these bills.